The first independent version of Microsoft Windows, version 1.0, released in 1985, lacked a degree of functionality and achieved little popularity. Windows 1.0 did not provide a complete operating system, but rather extended MS-DOS and shared the latter's inherent flaws and problems. Moreover, the programs that shipped with the early version comprised "toy" applications with little or limited appeal to business users.
Furthermore, legal challenges by Apple limited its functionality. For example, windows could only appear 'tiled' on the screen; that is, they could not overlap or overlie one another. Also, there was no trash can (place to store files prior to deletion), since Apple believed they owned the rights to that paradigm. Microsoft later removed both of these limitations by means of signing a licensing agreement.
Microsoft Windows version 2 came out in 1987, and proved slightly more popular than its predecessor. Much of the popularity for Windows 2.0 came by way of its inclusion as a "run-time version" with Microsoft's new graphical applications, Excel and Word for Windows. They could be run from MS-DOS, executing Windows for the duration of their activity, and closing down Windows upon exit (rumor has it that Windows was intended as a platform to run Microsoft Office applications first, and only later as a general-use GUI system).
Microsoft Windows received a major boost around this time when Aldus Pagemaker appeared in a Windows version, having previously run only on Macintosh. Some computer historians date this, the first appearance of a significant and non-Microsoft application for Windows, as the beginning of the success of Windows.
Versions 2.0x still used the real-mode memory model, which confined it to a maximum of 1 megabyte of memory. In such a configuration, it could run under another multitasker like DESQview, which used the 286 Protected Mode. Later two new version were released, named Windows/286 2.1 and Windows/386 2.1. Windows/286 could run in either Real or Protected Mode, which gave it access to up to 16 megabytes of memory, and Windows/386 included support for the 386 CPU's Enhanced Mode.
Version 2.03, and later 3.0, faced legal challenges from Apple over its overlapping windows and other features Apple charged mimicked the "look and feel" of its operating system and "embodied and generated a copy of the Macintosh" in its OS. Judge William Schwarzer dropped all but 10 of the 189 charges that Apple had sued Microsoft with on January 5, 1989.
Microsoft Windows scored a serious success with Windows 3.0, released in 1990. In addition to improved capabilities given to native applications, Windows also allowed a user to better multitask older MS-DOS based software compared to Windows/386, thanks to the introduction of virtual memory and of loadable VxDs. It made PC compatibles serious competitors to the Apple Macintosh. This benefited from the improved graphics available on PCs by this time (by means of VGA video cards), and the Protected/Enhanced mode which allowed Windows applications to use more memory in a more painless manner than their DOS counterparts could. Windows 3.0 could run in any of Real, Standard or 386 Enhanced modes, and was compatible with any Intel processor from the 8086/8088 upto 80286 & 80386. Windows tried to auto detect which mode to run in, although it could be forced to run in a specific mode using the switches: /r (real), /s (standard) and /3 (386) respectively.
Due to this backwards compatibility, applications also had to be compiled in a 16-bit environment, without ever using the full 32-bit capabilities of the 386 CPU.
A limited multimedia version, Windows 3.0 with Multimedia Extensions 1.0, was released several months after. This was bundled with the first sound card / CD-ROM multimedia kits e.g. Creative Labs Sound Blaster Pro along with titles such as MS Bookshelf. This version was the precursor to the multimedia features available in v3.1 later.
However, the features listed above, as well as the growing market support made Windows 3.0 wildly successful—selling around 10 million copies in the two years before the release of version 3.1, Windows 3.0 became a major source of income for Microsoft, and led the company to revise some of its earlier plans.
During the mid to late 1980s, Microsoft and IBM had co-operatively been developing OS/2 as a successor to DOS, to take full advantage of the aforementioned Protected Mode of the Intel 80286 processor, to allow use of up to 16M of memory. OS/2 1.0, released in 1987, supported swapping and multitasking and allowed running of DOS executables.
A GUI, called the Presentation Manager (PM), was not available with OS/2 until version 1.1, released in 1988. Although some considered it to be in many ways superior to Windows, its API was incompatible with Windows. (Among other things, Presentation Manager placed X,Y coordinate 0,0 at the bottom left of the screen like Cartesian coordinates, while Windows put 0,0 at the top left of the screen like most other computer window systems.) Version 1.2, released in 1989, introduced a new file system, HPFS, to replace the DOS FAT file system used by Windows.
By the early 1990s, conflicts developed in the Microsoft/IBM relationship. They co-operated with each other in developing their PC operating systems, and had access to each other's code. Microsoft wanted to further develop Windows, while IBM desired for future work to be based on OS/2. In an attempt to resolve this tension, IBM and Microsoft agreed that IBM would develop OS/2 2.0, to replace OS/2 1.3 and Windows 3.0, while Microsoft would develop a new operating system, OS/2 3.0, to later succeed OS/2 2.0.
This agreement soon however fell apart, and the Microsoft/IBM relationship was terminated. IBM continued to develop OS/2, while Microsoft changed the name of its (as yet unreleased) OS/2 3.0 to Windows NT. Both retained the rights to use OS/2 and Windows technology developed up to the termination of the agreement; Windows NT, however, was to be written anew, mostly independently (see below).
After an interim 1.3 version to fix up many remaining problems with the 1.x series, IBM released OS/2 version 2.0 in 1992. This was a major improvement: it featured a new, object-oriented GUI, the Workplace Shell (WPS), that included a desktop and was considered by many to be OS/2's best feature. Microsoft would later imitate much of it in Windows 95. Version 2.0 also provided a full 32-bit API, offered smooth multitasking and could take advantage of the 4 gigabytes of address space provided by the Intel 80386. Still, much of the system still had 16-bit code internally which required, among other things, device drivers to be 16-bit code as well. This was one of the reasons for the almost chronic bad supply of OS/2 with up-to-date device support. Version 2.0 could also run DOS and Windows 3.0 programs, since IBM had retained the right to use the DOS and Windows code as a result of the breakup.
At the time, it was unclear who would win the so-called "Desktop wars". But in the end, OS/2 did not manage to gain enough market share, even though IBM released several improved versions subsequently.
